Legal Research
Cases
Krishnamurthi v Patel

Krishnamurthi v Patel

Case [2023] NZHC 736 5 April 2023

No judgment structure available for this case.

Type to search within this case.

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-669

[2023] NZHC 736

BETWEEN
SIVAMANI KRISHNAMURTHI

Plaintiff

AND

ALOK PATEL

First Defendant

GULF HARBOUR FOODS LIMITED

Second Defendant

Hearing: 23 March 2023

Appearances:

M Pascariu and J Murdoch for the Plaintiff L Ponniah for the Defendants

Judgment:

5 April 2023

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

This judgment was delivered by me on 5 April 2023 at 2.00 pm.
Pursuant to Rule 11.5 of the High Court Rules.

…………………..
Registrar/Deputy Registrar

Solicitors/Counsel
Hamilton Locke, Auckland Ponniah Law, Auckland

SIVAMANI KRISHNAMURTHI v ALOK PATEL [2023] NZHC 736 [5 April 2023]

Background

[1] The second defendant, Gulf Harbour Foods Limited (GHF), operates a Four Square supermarket in Gulf Harbour, Whangaparaoa. The first defendant, Alok Patel, is the sole director and registered shareholder of GHF.

[2] The plaintiff, Sivamani Krishnamurthi, alleges that GHF is a joint venture vehicle, and that Mr Patel holds 24.5 per cent of the shares in GHF on constructive trust for him. Mr Krishnamurthi further alleges that Mr Patel has failed to account to him for his share of the profit from the joint venture, in breach of Mr Patel’s fiduciary duty owed to Mr Krishnamurthi.

[3] In his statement of claim dated 28 April 2022, Mr Krishnamurthi alleges two causes of action:

(a)the first is against Mr Patel for breach of fiduciary duty, seeking a declaration that Mr Patel holds 24.5 per cent of the shares in GHF on constructive trust for Mr Krishnamurthi, and an account of profits;

(b)the second is against Mr Patel and GHF for relief under s 174 of the Companies Act 1993, on the basis that the affairs of GHF have been conducted in a manner that is oppressive, unfairly discriminatory, or unfairly prejudicial to Mr Krishnamurthi. Mr Krishnamurthi seeks an order that Mr Patel account to him for his share of the profits, and an order directing that GHF’s share register is rectified pursuant to s 91(1) of the Companies Act to record Mr Krishnamurthi as shareholder of
24.5 per cent of the shares. Mr Krishnamurthi also seeks an order that Mr Patel is then required to acquire his 24.5 per cent shareholding.

[4] GHF has applied for orders that the second cause of action, as against GHF only, be struck out and that GHF be removed as a party, on the grounds that the statement of claim discloses no reasonably arguable cause of action against GHF.

Legal principles

[5] Pursuant to r 15.1(1) of the High Court Rules 2016 (HCR), the Court may strike out all or part of a pleading if it:

(a)discloses no reasonably arguable cause of action; or

(b)is likely to cause prejudice or delay; or

(c)is frivolous or vexatious; or

(d)is otherwise an abuse of the process of the Court.

[6] The principles governing strike-out applications are summarised in the Court of Appeal decision in Attorney-General v Prince,1 as endorsed by the Supreme Court in Couch v Attorney-General

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Krishnamurthi v Patel

Details

AGLC: Krishnamurthi v Patel [2023] NZHC 736
Case: [2023] NZHC 736
Decision Date: 5 April 2023

CaseChat Overview and Summary

In the High Court of New Zealand, the case of Krishnamurthi v Patel and Gulf Harbour Foods Limited revolves around allegations of breach of fiduciary duty and oppressive conduct under the Companies Act 1993. The plaintiff, Sivamani Krishnamurthi, claims that Alok Patel, the sole director and shareholder of Gulf Harbour Foods Limited, holds 24.5% of the shares on constructive trust for him and has failed to account for his share of the profits. Krishnamurthi filed two causes of action: one for breach of fiduciary duty and an account of profits against Patel, and another against Patel and the company for relief under section 174 of the Companies Act, alleging oppressive conduct.

The central legal issue was whether Krishnamurthi had standing to bring an application under sections 91 and/or 174 of the Companies Act. Gulf Harbour Foods Limited argued that it need not be a party to the proceedings as relief was only claimed against Patel. The Court had to determine if Krishnamurthi's claim to beneficial ownership, without more, was sufficient to constitute him a shareholder for the purposes of section 174 and whether the company was a necessary party to the proceedings if Krishnamurthi had standing.

The Court found that Krishnamurthi's claim to beneficial ownership was insufficient to give him standing under section 174, as something more than a beneficial interest was required to sustain a finding that the shares had passed to him by operation of law. The authorities indicated that an unregistered party has standing under sections 91 and 174 only when there is an issue with the share register, not when there is a substantive dispute between parties regarding beneficial ownership of shares. In this case, Krishnamurthi’s equitable claim could not be rectified under section 91, and his standing under sections 91 and 174 should be consistent.

The Court also held that if Krishnamurthi were successful with his first cause of action, he would then have standing to obtain relief under section 174. However, until then, the company was not a necessary party to the proceedings. The Court exercised its discretion under Rule 10.4 of the High Court Rules to stay the second cause of action until further order of the Court. Costs on the application were ordered to lie where they fell.

The Court further directed that any interlocutory application for further discovery by the plaintiff must be filed by a specified date, with responses from the defendant due thereafter. The proceeding was adjourned for a case management conference to address outstanding matters, readiness for trial, and a pre-trial timetable.

Orders